Friday, May 19, 2006

Health insurance is competitive. Most consider it a commodity and compare based on price alone.

Carriers know this and are constantly manipulating the policies in such a way as to minimize benefits (and in turn claims) in order to keep the premiums affordable.

Drug formularies are just one way to accomplish this.

In the “old” days you had a deductible before drugs were reimbursed. Then came the drug copay plans and everything changed. Suddenly meds went from being a relatively small portion of claims, about 8% of total claims paid to almost triple that overnight.

The carriers countered by introducing higher copays, generics with low copays and separate drug deductibles. None of this worked until the PBM’s (pharmacy benefit managers) introduce formularies.

Simply put, certain drugs were discounted greatly and these became part of the formulary. Others, mostly the newer meds, were not on formulary and carried a higher copay. The carriers introduced 3 & 4 tier pricing where a generic might have a $5 copay (no deductible) while other meds were subject to a $100 (or higher) deductible then $20 for brand formulary & $45 for brand non-formulary.

Lately carriers have become quite creative by creating a 4th tier and other ways of paying for the most expensive meds.

The newer, more pricey drugs are now priced at a 4th tier, perhaps $60 or more. Sometimes the non-formulary drugs are a copay PLUS the difference in brand formulary and the copay. So if a non-formulary drug is $200 and a formulary brand is $50 your cost for the med might be $60 + 80% of the difference in $200 and $50.

Some plans don’t pay for non-formulary meds if there is a generic equivalent or a formulary brand equivalent.

Bottom line is, if you don’t understand your plan benefits you could get hosed when you go to fill your prescription.

There is another issue and that is off-label scripting. Some docs are prescribing meds for something other than is accepted protocol. I have a client that is taking an anti-depressant for TMJ. Another is taking a thyroid medicine to control cholesterol. Under some plans either of these meds might not be covered since they are prescribed for a condition other than their original intent.

So where does this leave the insured?

First and foremost you need to read your policy and understand what is covered, what isn’t. If you are unsure about coverage for a particular med, ask your carrier.

Some meds, particularly those used for treating certain cancer, can be quite expensive. It is not unusual to find meds running $2,000 - $5,000 per month (and even higher).

If your plan does not cover the med you will have to come out of pocket or change your med.

I have never been a proponent of dread disease policies but my attitude is changing. Supplemental plans for cancer or critical illness are becoming more important in my business and something everyone should consider. Many of the critical illness plans, and some of the cancer plans, now pay a lump sum benefit on first diagnosis. That mean, even before you are treated, you could receive a check from your carrier for $10,000 or more when you are first diagnosed.

That check may be the difference in getting the medicine you need to keep you alive or going in debt.

Health insurance is competitive. Most consider it a commodity and compare based on price alone.

Carriers know this and are constantly manipulating the policies in such a way as to minimize benefits (and in turn claims) in order to keep the premiums affordable.

Drug formularies are just one way to accomplish this.

In the “old” days you had a deductible before drugs were reimbursed. Then came the drug copay plans and everything changed. Suddenly meds went from being a relatively small portion of claims, about 8% of total claims paid to almost triple that overnight.

The carriers countered by introducing higher copays, generics with low copays and separate drug deductibles. None of this worked until the PBM’s (pharmacy benefit managers) introduce formularies.

Simply put, certain drugs were discounted greatly and these became part of the formulary. Others, mostly the newer meds, were not on formulary and carried a higher copay. The carriers introduced 3 & 4 tier pricing where a generic might have a $5 copay (no deductible) while other meds were subject to a $100 (or higher) deductible then $20 for brand formulary & $45 for brand non-formulary.

Lately carriers have become quite creative by creating a 4th tier and other ways of paying for the most expensive meds.

The newer, more pricey drugs are now priced at a 4th tier, perhaps $60 or more. Sometimes the non-formulary drugs are a copay PLUS the difference in brand formulary and the copay. So if a non-formulary drug is $200 and a formulary brand is $50 your cost for the med might be $60 + 80% of the difference in $200 and $50.

Some plans don’t pay for non-formulary meds if there is a generic equivalent or a formulary brand equivalent.

Bottom line is, if you don’t understand your plan benefits you could get hosed when you go to fill your prescription.

There is another issue and that is off-label scripting. Some docs are prescribing meds for something other than is accepted protocol. I have a client that is taking an anti-depressant for TMJ. Another is taking a thyroid medicine to control cholesterol. Under some plans either of these meds might not be covered since they are prescribed for a condition other than their original intent.

So where does this leave the insured?

First and foremost you need to read your policy and understand what is covered, what isn’t. If you are unsure about coverage for a particular med, ask your carrier.

Some meds, particularly those used for treating certain cancer, can be quite expensive. It is not unusual to find meds running $2,000 - $5,000 per month (and even higher).

If your plan does not cover the med you will have to come out of pocket or change your med.

I have never been a proponent of dread disease policies but my attitude is changing. Supplemental plans for cancer or critical illness are becoming more important in my business and something everyone should consider. Many of the critical illness plans, and some of the cancer plans, now pay a lump sum benefit on first diagnosis. That mean, even before you are treated, you could receive a check from your carrier for $10,000 or more when you are first diagnosed.

That check may be the difference in getting the medicine you need to keep you alive or going in debt.